Impact of microfinance on enhanced wellbeing of self-help group women in post-COVID scenario

Abstract

In the past few years, Microfinance has been usually contemplated as an effective strategy instrument in the fight against poverty. The SHG women situation in India has been particularly difficult during COVID-19. It had distressing consequences on SHG women life, their income making activities and livelihoods. Therefore, the question arises whether Microfinance credit leads to poverty reduction and improve their decision-making ability in the post COVID era. To address this question, the present study undertakes to identify the impact of Microfinance, Micro Credit and Savings on the Decision making ability of SHG women in the post COVID era. A number of non-governmental organisations (NGOs) provide micro-finance programmes to women in need in order to gain access to credit and savings services. In the current research, the NGO named ‘Peetambra Foundation’ registered in 2008 in Pink City Jaipur, Rajasthan is instrumental in providing data related to SHG women registered with them. Total 306 SHG women were surveyed in the nearest village of Jaipur city. The findings revealed positive but insignificant impact of Microfinance on Financial improvement. In addition, Financial improvement has a both negative and significant impact on the Decision Making ability.

Keywords

Microfinance self-help group financial improvement micro-credit and micro-savings decision-making ability

1. Introduction

“It is women who are leaders in change and without their participation poverty can never be removed.”

– Ela Ben Bhatt

Microfinance is an amalgamation of processes for the provision of financial services in form of small-size credit, intended at satisfying the needs of an entrepreneur (required for production or creation) or of consumption of a household that does not have access to the formal banking system (Ali & Alam, 2001).

Microfinance is a well-studied area of research and has also experienced a lot of ups and downs due to crisis situations from financial markets, low repayment rates, etc., but the COVID-19 is a different predicament. COVID-19 has severely affected all businesses in India. The worst affected were the people in the low-income group employed in the microfinance sector. This sector was strongly tested at the start of the COVID-19 pandemic. Self-help groups and microfinance institutions, deal with high-touch businesses, which was a strict no-no during the pandemic, and serving lower-income clients was severely impacted.

Microfinance has legalized granting credit to poor people who were unable to get credit from the financial institutions due to a lack of collateral assets. The microfinance sector has seen a lot of crises due to economic conditions, but COVID-19 was the biggest impediment in its way. Self Help Group deals in high-touch business and COVID-19 stopped its functioning. In the research conducted by Ali and Alam (2010) micro credit and savings is an essential tool for increasing the provision of loans, other basic facilities, and services. Microfinance touches the lives of the poor positively and improves their wellbeing and living standards.

As stated in the concept paper “Microfinance Institutions in India.” published in Housing Development Finance Corporation by Piyush Tiwari and S. M. Fahad, emphasis is needed to reach out to the lower-income population and provide credit to the poor rather than just providing micro loans. In this paper, researchers have tried to study the importance of women’s empowerment through provision of microfinance and improving the standard of their living in pre and post covid scenarios. The Self-Help Groups act as a link between microfinance and women empowerment. Thus, the study of SHGs in the current financial condition & empowering women have vital implications in the analysis of the study.

The requisite to grow the financial and social condition of women is renowned predominantly in South Asian regions where male dominance is prevalent for ages and women are victims of this gender based dominance. These regions have traditionally been categorized by substantial transformations in women’s rights over family assets, and the right to schooling (primary and secondary) and wellbeing (Chen et al., 1981). It is generally understood that women empowerment involves not just their right to asset building but to exercise choice (decision making), including goal setting (Kabeer, 1999).

The three most important mechanisms of empowerment existing in the available works are ‘Resources’, ‘Agency’ and ‘Achievements’, there are different views and mechanisms expressed in different works. Resources are empowering factors that encourage empowerment. The next concept is agency, which is the core of many thoughts related to empowerment. It includes the capacity to frame tactical selections, increase independence, for better decisions to bring forth significant consequences in their life. The last concept Achievements are outcomes that women experience due to the access to the earlier to mechanisms. Further with regard to research related to women’s empowerment, Kishor (2000) has established a three dimensional theoretical outline for empowerment that classifies these three dimensions as ‘Evidence’, ‘Sources’ and ‘Setting’.

In conclusion, some programs contributed to the enhancement of the decision-making abilities of women whereas the majority shared the other side of the story. Hence, it is imperative to study the impact of financial sustainability on the decision-making abilities of SHG women. Our study contributes and brings upon a major breakthrough in this regard.

2. Literature review

Joining a self-help group needs a kind of responsiveness and enthusiasm. Continuation of SHG work also plays a vital role in the saving and consumption level of these women. This research tries to study the impact of their improved standard of living on savings and consumption. Apart from the financial benefits, savings and consumption, it is important to study hygiene factors and self-care measures in the pre-and post COVID 19 periods

Researchers are planning to conduct this research in the context of Rajasthan state which certainly stands a robust practical significance as little research was made in this regional context. Rajasthan is in the seventh rank in terms of the population. Seventy five percent of people reside in rural areas in Rajasthan. If we compare the literacy rate with respect to males and females in Rajasthan, the gap is broader as the male literacy rate is 80.8% as compared to 57.6% of females. Females are not so much literate in rural areas of Rajasthan. Now a day’s females are also trying their best to empower themselves. It is happening with the help of microfinance institutions and NGOs. One of the NGOs named ‘Peetambra Foundation’ registered in 2008 in Pink City Jaipur, Rajasthan also provides the funds to such women who want to empower themselves. This NGO conducts many awareness programs like healthcare, education, training and many more for SHG women. These women make artificial jewelry and handicraft products. SHG women who are members of this NGO will be the sample of our study.

The majority of women are inspired by friends, relatives or neighbors who are a part of SHG, and their positive feedback about the working of the SHGs inevitably motivates non-members to join SHG. It is important to therefore study the relation between women empowerment and the decision-making ability of women working in SHG.

Microfinance is one of the major resources which catalyzes in the enhancement of the well-being of SHG women and hence it would be interesting to study its impact on the well-being in the post-COVID 19 eras. Though many studies have been conducted in this field, we have picked the major ones to accomplish our literature review for the purpose of this proposal.

Panigrahi, Das and Kanti (2017) in their study recognized that microfinance had a positive impact on the overall economic growth of poor people in the rural area. It would be exciting to see the impact in the post-COVID 19 scenarios. Zaei et al. (2018) concluded that microfinance enhances self-confidence and self-esteem in women associated with SHG and empowers them financially. Drake (2011) has beautifully correlated Micro Finance and Women’s health in her article. It is an inevitable variable and must be studied in detail. There are many studies to support the fact that Micro-Finance has a huge encouraging impact on women’s empowerment. Recently, Kumar (2020) supported this study by taking a sample from Uttar Pradesh. Naik and Ramana (2017) in their paper threw light on the impact of Micro-Finance on increased income levels and consumption levels of SHG women in the Anantapuramu District of Andhra Pradesh. It would be interesting to capture the income and consumption levels post COVID.

Bhatia and Singh (2019) in their study recognized that financial inclusion impacts the empowerment of women. Many studies (Desai & Joshi, 2013; Mahmud, 2003) have reported that participation of women in household decision-making increased manifolds after they joined SHG. However, there is a major area like decision-making that needs to be studied as to how much power women are enjoying by making decisions. The Micro Finance model is very much successful in India in succeeding in financial sustainable development. Many voluntary agencies, governments, banks and individuals are very much inspired by it. According to Sa-Dhan 2003, sustainability can be measured in numerous categories like formal group, and individual and can be related to financial aspects. It is equally important to study whether these women are able to take decisions by themselves or if they still rely on their male counterparts.

The decision-making abilities of SHG women are still a debatable issue. Gash (2017) in his study highlighted the moderate effect on the decision-making abilities of SHG women. Similarly, various reviews of SHG programs (Brody et al., 2017, Dìaz-Martin et al., 2020) have suggested a small and insignificant impact on their decision-making abilities. However, few Indian studies (Jejeebhoy et al., 2017; Prillaman, 2017; Desai & Joshi, 2014) have found a positive impact on the decision-making of these women. Nonetheless, a stellar number of studies could not find a positive effect on the decision-making abilities of these women groups, Ismayilova et al. (2018), Hoffmann et al. (2017), Holden et al. (2016), Banerjee et al. (2015), Joshi et al. (2015), Tarozzi et al. (2015), Beaman et al. (2014), and Baro et al. (2013). Further in their study Roy et al. (2015) stated that women had little or rather no say in matters relating to income, purchases and setting a budget for the household. There should be proper research on Microcredit and microfinance and there is a need to analyze the role it plays in poverty alleviation of poor women.

Chavan and Kumar (2002) scrutinize the role of micro finance in getting over poverty in several emerging countries and compared it with various microcredit schemes for poverty-reducing schemes in India. This study concluded that these poverty reduction schemes through the provision of microfinance somewhat increases the revenue earned by the borrowers. Gurses (2009) conducted a study in Turkey and found that microfinance is surely a well recognized tool to alleviate poverty.

Siddiqi (2008) opined that there are favorable as well as adverse factors affecting the net impact of microfinance on poverty reduction, especially with respect to Islamic microfinance. He argues that since the lot of people below poverty line deliberate that interest is prohibited by Islam and MFI’s charge high interests. Another issue highlighted by him is related to gender as women borrowing these loans usually get ill-treated by their male counterparts. He concludes that Islamic microfinance is much superior to conservative microfinance.

3. Conceptual model

Figure 1.

Conceptual model.

Hypothesis of the study

H1a:

“There is a significant impact of Micro-Finance on Financial Improvement in post COVID Scenario”

H1b:

“There is a significant impact of Micro-Credit and Micro-Savings on Financial Improvement in post COVID Scenario”

H1c:

“There is a significant impact of Micro-Finance on Financial Sustainability in post COVID Scenario”

H1d:

“There is a significant impact of Micro-Credit and Micro-Savings on Financial Sustainability in post COVID Scenario”

H1e:

“There is a significant impact of Financial Improvement on Financial Sustainability in post COVID Scenario”

H1f:

“There is a significant impact of Financial Improvement on Decision-Making Ability in post COVID Scenario”

H1g:

“There is a significant impact of Financial Sustainability on Decision-Making Ability in post COVID Scenario”

4. Research methodology

This research is survey-based, and therefore, a random sampling technique has been espoused. We have collected the primary data from the nearest villages of Pink City, Jaipur, Rajasthan, India from women SHG members registered under the NGO named “Peetambara Foundation”. A systematic, structured questionnaire (demographic and 5-point Likert scale questionnaire) has been used as an instrument of data collection. Demographic and family data is captured from the respondents like’ age, education, number of family members, occupation, monthly family income before and after joining SHG, and many other aspects. Consent has been obtained from all respondents before they would answer the survey questions. A local person has been hired for data collection to explain the objective and research questions to the respondents in the local language. Data has been collected from 306 respondents.70% of the respondents belong to the 20–30 years age group. Only 3% of the respondents belong to the 40–50 years age group. Their average monthly income is higher after joining SHG. Many SHG women are expected to be illiterate and hence the survey method adopted would be a schedule. Secondary data could also be utilized for this study and collected through journals, books, websites and many more resources. Different measures were used to collect information about the objective of the study. To analyse the data, SPSS and AMOS software has been used. Principal component analysis has been performed to extract a set of factors to study the impact of micro-finance on the enhanced well-being of SHG women.

5. Results

5.1 Measurement model

The model entailed four independent variables like Micro-Finance, Micro-Credit and Micro-Savings, Financial Improvement, and Financial Sustainability and three dependent variables Decision-making Ability, Financial Sustainability and Financial Improvement. The factor loadings of all the constructs are more than 0.60 which is more than the standard cut-off of 0.40 (Hair et al., 2010)

5.2 Validity and reliability

The validity of the measurement model is tested through the convergent and discriminant validity (Table 1). The AVE is more than 0.50 for all the variables that confirm the convergent validity (Kline, 2016). Moreover, the ASV and MSV are less than AVE for all the study measures that satisfy the discriminant validity. The reliability of all the variables is also established since the composite reliability is more than 0.70.

Table 1
Convergent and discriminant analysis

Variables	CR	AVE	MSV	ASV	MaxR(H)
Financial Sustainability	0.800869	0.574048	0.477481	0.144212	0.813638
Micro-Finance	0.899201	0.690542	0.451584	0.124239	0.900785
Micro-Credit and Micro-Savings	0.885683	0.660007	0.451584	0.133405	0.890893
Financial Improvement	0.84137	0.519153	0.477481	0.174187	0.858052
Decision-Making Ability	0.794019	0.667533	0.190096	0.070355	0.932552

CR – “composite reliability”, AVE – “Average variance extracted”, ASV – Average shared variance, MSV – “Maximum shared variance”.

Table 2

Average variance extracted and correlation matrix

Variables	Financial Sustainability	Micro-Finance	Micro-Credit and Micro-Savings	Financial Improvement	Decision-Making Ability
Financial Sustainability	0.75766
Micro-Finance	$-$ 0.034	0.830988
Micro-Credit and Micro-Savings	0.228	$-$ 0.672	0.812408
Financial Improvement	0.691	$-$ 0.051	0.163	0.720522
Decision-Making Ability	$-$ 0.215	0.204	0.059	$-$ 0.436	0.817027

Note: Values in diagonal are the square root of AVE and the off-diagonal values are correlations.

5.3 Structural model

SEM-Structural equation modelling has been carried out to test the conceptual model, and it also returned an adequate model fit. Table 3 represents the estimates (standardized regression weights) of the offered relationships and their corresponding probability value. This study suggested seven direct associations (H1a to H1g) (Table 3). H1a establish a positive but insignificant impact of Micro-Finance on Financial Improvement ( $\beta=$ 0.031, $p=$ 0.588). In comparison, H1b is proposing a positive and significant impact of Micro-Credit and Micro-Savings on Financial Improvement at a 10% significance level ( $\beta=$ 0.111, $p=$ 0.075). As presented in Table 3, H1c also going to be supported ( $\beta=$ 1.037, $p=$ 0.00) and it’s proposing a positive and significant association between Financial Improvement and Financial Sustainability. H1d, however, recommends a positive and significant impact of Micro-Credit and Micro-Savings on Financial Sustainability ( $\beta=$ 0.178, $p=$ 0.016). Similarly, H1e ( $\beta=$ 0.251, $p=$ 0.002) and H1g ( $\beta=$ 0.177, $p=$ 0.039) are also showing a positive and significant association between Micro-Credit and Micro-Savings-Financial Sustainability and Decision Making Ability-Financial Sustainability.

Table 3
Beta coefficients

Variables			Estimates	$P$ -value
Financial Improvement	$\leftarrow$	Micro-Finance	0.031	0.588
Financial Improvement	$\leftarrow$	Micro-Credit and Micro-Savings	0.111	0.078
Financial Sustainability	$\leftarrow$	Financial Improvement	1.037	***
Financial Sustainability	$\leftarrow$	Micro-Finance	0.178	0.016
Financial Sustainability	$\leftarrow$	Micro-Credit and Micro-Savings	0.251	0.002
Decision-Making Ability	$\leftarrow$	Financial Improvement	$-$ 0.641	0.002
Decision-Making Ability	$\leftarrow$	Financial Sustainability	0.177	0.039

6. Discussion

We had developed the conceptual model to understand the impact of Micro-Finance on Decision Making ability of the SHG women based on the identified research gap and perception of the SHG women after the COVID era. Our model reveals a positive but insignificant impact of Micro-Finance. In this study, we have developed a conceptual model to understand the impact of Micro-Finance on the Decision Making Ability of SHG women based on the identified research gap and perception of the SHG women after COVID era. Our model reveals a positive but insignificant impact of Micro-Finance on Financial Improvement after the COVID era. Previous studies (Singh, 2004; Nader, 2008; Kayser, 2010; Zaei et al., 2018) confirm a positive and significant impact on the financial situation of women after joining SHG. The current study demonstrates that rural women in Rajasthan have had to struggle with intensifying strain and anxiety and loss of income. The result of this study implies that their financial situation is improving but not at a significant level after COVID 19. However, the impact of Micro-Finance and Micro-Credit & Micro-Savings on Financial Sustainability is positive and significant. This outcome reflects that if SHG membership nurtures the current and future income of the SHG women and returns on savings, we expect that financially they will be strong in the future. Further, we tested respondents’ participation in three types of decisions: Family Planning, Children’s Schooling and Marriage.

Results reveal a negative and significant impact of financial improvement on the Decision-Making Ability. We were expecting to upsurge women’s decision-making ability within their households but the study reveals the opposite outcome. This result doesn’t match with a few Indian studies (Jejeebhoy et al., 2017; Prillaman, 2017; Desai & Joshi, 2014). Lastly, the impact of Financial Sustainability on Decision-Making is found significant and positive. Therefore, we conclude that in the long term their Decision-Making will improve if women are strong financially.

7. Managerial implications and limitations

It is imperative to study the interventions of Micro-Finance for the purpose of both academicians as well as policy-makers. The most important dimension of the results of Micro-Finance is its influence on women’s empowerment and the well-being of the women associated with SHG in post COVID scenario. Therefore, this study contributes to an existing body of literature on the effects of Micro-Finance within a precise regional perspective as this study highlights the contribution of small-level NGOs in empowering the illiterate women of the pink city, Rajasthan. Moreover, the topographical scope of the research is to a certain degree narrow and is just confined to villages near Jaipur City. Expansion in the research area would raise a more exhaustive understanding of the problem.

Footnotes

Acknowledgments

This study is a part of a funded research project under SVU.

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